Malaysia to switch to bio-diesel next year

Malaysia will switch to bio-diesel next year, a year ahead of schedule, with government vehicles slated to start using the palm oil-laced fuel to cushion the impact of rising fuel prices, a news report said Wednesday.

The government was expected to save "hundreds of millions of ringgit" through cutbacks in oil subsidies by convincing Malaysians to switch to bio-diesel, a technologically proven mixture of diesel and palm oil, said Peter Chin, the plantations, industries and commodities minister, according to the Star, a Malaysian newspaper.

The fuel is a mixture of 5 percent palm oil, used in cooking, and 95 percent diesel, but Chin said eventually bio-diesel will be made of 20 percent palm oil and 80 percent diesel.

Diesel powered vehicles belonging to the ministries of transport, defense and plantations, industries and commodities, will begin using bio-diesel next year before the alternative fuel is introduced to the public, the report said.

The government had planned to start using bio-diesel only in 2007 "but because our plans are going very well, it seems that we can start way ahead of schedule," Chin told the daily.

Malaysia imports most of its diesel fuel but it's the world's biggest producer of palm oil. The government says that adding palm oil to diesel fuel would reduce consumption by about 418,000 liters (110,427 gallons) a year.

Industries used 2.8 billion liters (0.74 billion gallons) of diesel last year, while others who qualified for subsidized diesel, like public transport operators, consumed 5.56 billion liters (1.47 billion gallons).

The government has said that it cannot maintain the subsidies, which keep gasoline prices in Malaysia among the lowest in the region, reports the AP. I.L.